20120416AVU to Clearwater Paper 1-10.pdf

Jean Jewell
From: Kimball, Paul [[e-mail] ]
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Subject: Avista's Responses to Clearwater Paper Corporation Production Requests
Attachments: CW_PR1 Attachment A - Avoided Cost Calculation With DSM_ Without CO2_1 12811 _
(handedout December 1 5).xlsx; CW_PR_1 Attachment B - Avista IRP Method Avoided Costs
12-15-2011 .pdf; CW_PR_1 .docx; CW_PR_2 Attachment A.xlsx; CW_PR_2.docx; CW_PR_3
Attachment A - Updated Avoided Cost Calculation—With DSM_ Without CO211281 1 .xlsx;
CW PR 3.docx; CW PR 4.docx; CW_PR_5.docx; CW_PR 6.docx; CW PR 7.docx;
CW PR 8 Attachment A.xlsx; CW PR 8.docx; CW PR 9.docx; CW PR 10.docx
April 11, 2012
Richardson & O'Leary, PLLC 2) - 111 o
515 N 27th Street
Boise, ID 83702 rn Attn: Peter Richardson
Gregory Adams
Production Request of Clearwater Paper Corporation in Case No. GNR-E-11-03
Attached are Avista's responses in connection to Clearwater Paper production requests in the above referenced
docket. Included in this email are Avista's responses to the following Production Requests: 1 through 10.
Hard copies of Avista's responses were mailed today, 04/11/12.
If there are any questions regarding the information, please contact Michael Andrea at [phone] or via e-
mail at [e-mail]
Thank you,
Paul Kimball
Senior Regulatory Analyst
State & Federal Regulation
Avista Corporation
1411 E. Mission Ave, Box 3727
Spokane, WA 99220-3727
[phone] direct
[phone] cell
[e-mail]
AVISTA CORPORATION
RESPONSE TO REQUEST FOR INFORMATION
JURISDICTION: IDAHO DATE PREPARED: 4/9/2012
CASE NO: GNR-E-1 1-03 WITNESS: Clint Kalich
REQUESTER: Clearwater RESPONDER: Clint Kalich
TYPE: Production Request DEPARTMENT: Energy Resources
REQUEST NO.: CW-1 TELEPHONE: [phone]
REQUEST:
Please provide a copy of the handout the Company provided at the meeting to present and
discuss IRP Models at the Idaho Public Utilities Commission on December 15, 2011. Include all
work papers, spreadsheets in electronic format with formulas intact, and model outputs used in
producing the handout.
RESPONSE:
The handout and associated working papers are attached. The specific files are:
CWPR1 Attachment A - Avoided Cost Calculation —With DSM_ Without CO2112811
(handed out December 15)
CW_PR_l Attachment B - Avista IRP Method Avoided Costs 12-15-2011
In preparing this response, Avista discovered a discrepancy between the presentation and the
spreadsheet. The capacity payment for base load resources was shown to be $1 0.07/MWh when
the actual value calculated in the spreadsheet was $11.02.
AVISTA CORPORATION
JURISDICTION:
CASE NO:
REQUESTER:
TYPE:
REQUEST NO.:
RESPONSE TO REQUEST FOR INFORMATION
IDAHO DATE PREPARED: 4/9/2012
GNR-E-1 1-03 WITNESS: Clint Kalich
Clearwater RESPONDER: Clint Kalich
Production Request DEPARTMENT: Energy Resources
CW-2 TELEPHONE: [phone]
REQUEST:
For each of the five QF configurations presented in Table 3 of Clint Kalich's Direct Testimony,
please provide all work papers, spreadsheets in electronic format with formulas intact, and model
outputs used in producing the values found in Table 3. For each of Company's gas-fired
generation plants, please provide a list of the annual capacity factor, by year, beginning in 2013
through the end of the 20 year analysis period found in the model runs for each of the five QF
configurations.
RESPONSE:
The working papers are included in the File "CW_PR_2 Attachment A."
There were no CCCT plant runs performed for this analysis. Therefore Avista is unable to respond
to this portion of the request.
AVISTA CORPORATION
RESPONSE TO REQUEST FOR INFORMATION
JURISDICTION: IDAHO DATE PREPARED: 4/9/2012
CASE NO: GNR-E-1 1-03 WITNESS: Clint Kalich
REQUESTER: Clearwater RESPONDER: Clint Kalich
TYPE: Production Request DEPARTMENT: Energy Resources
REQUEST NO.: CW-3 TELEPHONE: [phone]
REQUEST:
If the Company were to offer a Qualifying Facility (QF) with IRP Methodology contract pricing
utilizing the methodology in effect on the date of this request, please state if the assumptions in
the calculation would be consistent with the assumptions included in the 2011 IRP filed with the
Idaho Public Utilities Commission on August 25, 2011 (AVU-E-1 1-04). Please provide the
following inputs that would be used in calculating IRP Methodology rates and indicate if the
inputs are consistent with the 2011 IRP:
(a)Natural gas fuel forecast,
(b)Firm load forecast,
(c)Resource stack, and
(d)Forecast of the year and month of first future peak load deficit.
RESPONSE:
Avista uses an "IRP Methodology" to calculate negotiated rate prices. Being a methodology,
Avista uses it as such and updates key assumptions that might have changed significantly since its
publication. Changes can include natural gas prices, the load forecast, and changes in our
resources and contract (including new QF purchases) obligations.
Since the 2011 IRP, each of the above-mentioned assumptions have changed, reflecting the recent
fall in natural gas prices, reduced loads, and new power supply contracts including the Palouse
Wind farm. These changed assumptions may be found by reviewing the file entitled "CW_PR_3
Attachment A - Updated Avoided Cost Calculation —With DSM_ Without CO2_1 128 11.xlsx"
which is attached.
AVISTA CORPORATION
RESPONSE TO REQUEST FOR INFORMATION
JURISDICTION: IDAHO DATE PREPARED: 4/9/2012
CASE NO: GNR-E-1 1-03 WITNESS: Clint Kalich
REQUESTER: Clearwater RESPONDER: Clint Kalich
TYPE: Production Request DEPARTMENT: Energy Resources
REQUEST NO.: CW-4 TELEPHONE: [phone]
REQUEST:
Reference the Company's Preferred Resource Strategy set forth in the 2011 IRP (Table 1, p.
viii), including plans to acquire an 83 MW SCCT in 2018. Please provide the prices the
Company would offer a QF that would provide power in the same configuration as the SCCT. In
other words, please run the projected output of the 83 MW SCCT through the Company's IRP
Methodology as though it were a QF requesting contract pricing.
RESPONSE:
Avista has not performed this analysis and it is not clear how such analysis would be performed
based on the information provided in this production request because much of the information
necessary to provide an estimate has not been provided (e.g., timeframe of deliveries, location).
However, it provides an excellent example of the importance of a negotiated PURPA rate.
Hypothetically, because a SCCT would not be expected to run for any significant number of hours
during a year, likely a capacity payment would need to be negotiated, along with some availability
testing to ensure the project would be available to generate during peak utility load hours.
AVISTA CORPORATION
RESPONSE TO REQUEST FOR INFORMATION
JURISDICTION: IDAHO
CASE NO: GNR-E-1 1-03
REQUESTER: Clearwater
TYPE: Production Request
REQUEST NO.: CW-5
DATE PREPARED: 4/9/2012
WITNESS: Clint Kalich
RESPONDER: Clint Kalich
DEPARTMENT: Energy Resources
TELEPHONE: [phone]
REQUEST:
Reference the Company's Preferred Resource Strategy set forth in the 2011 IRP (Table 1, p.
viii), including plans to acquire an 83 MW SCCT in 2018. Please provide the assumptions
regarding expiring contracts in developing this resource portfolio. Did the Company include the
Clearwater Paper QF in its resource portfolio past the time of expiration of the existing contract
in 2013? Please explain the impact on Avista's future resource needs under the assumption the
Clearwater Paper QF is not available to Avista after expiration of the contract in 2013.
RESPONSE:
As detailed in Table 2.5 of Avista's 2011 IRP (page 2-20), a total of approximately 253 MW of
winter capacity will expire between now and 2018. In the 2011 IRP, the Clearwater Paper contract
was assumed to continue past its expiration in 2013 due to its nature, and the fact that some
assumption must be made. However, and as explained in the response to Production Request 3, for
the purposes of a negotiated rate calculation, various assumptions are updated. Therefore, when
the Clearwater Paper PURPA contract (or any other expiring PURPA contract) rate is negotiated,
the resource is removed from the tabulation of the Company's load and resource balance, thereby
pushing the utility into deficit sooner and enabling capacity payments sooner than if the contract
was assumed to continue.
AVISTA CORPORATION
RESPONSE TO REQUEST FOR INFORMATION
JURISDICTION: IDAHO
CASE NO: GNR-E-1 1-03
REQUESTER: Clearwater
TYPE: Production Request
REQUEST NO.: CW-6
DATE PREPARED: 4/9/2012
WITNESS: Clint Kalich
RESPONDER: Clint Kalich
DEPARTMENT: Energy Resources
TELEPHONE: [phone]
REQUEST:
According to the Commission's accepted "IRP Methodology' (IPUC Order No. 26576, JPC-E-
95-9) and IPUC Staff Witness Rick Sterling's direct testimony Exhibit 101, "the avoided cost of
the QF project is the difference in the present value of the revenue requirements (PVRR)
between the base case resource plan and a modified resource plan that includes the QF resource."
(Exhibit 101, JPC-E-95-9, R. Sterling, page 14.) Please explain in detail how the Company
incorporates the "revenue requirement" as it would in filing for a certificate of public
convenience and necessity (i.e. return of and on investment, all taxes, etc.) in the calculation of
rates offered to QFs.
RESPONSE:
Under the IRP Methodology, assumptions are first reviewed and updated where appropriate (e.g.,
natural gas, loads and resources). Where assumptions affecting the wholesale marketplace have
changed (e.g., natural gas) the AURORA IRP model is re-run and Avista's PRiSM model is
updated with the new wholesale market data (i.e., value of the new generation resource options).
The Company then runs two new PRiSM runs to determine the capacity and energy values. In the
first new PRISM run, the capacity component of the QF resource is added to the load and resource
tabulation (L&R). The difference between the two economic values (i.e., revenue requirement
between the pre-QF PRiSM run and PRiSM run containing the QF capacity) determines the
avoided capacity value available for the QF contract. A second PRISM run is then performed
where both the expected capacity and energy contributions of the QF resource are added to the
L&R. The difference between the first PRISM run and the second PRISM run determines the
energy payments available to the QF contract.
AVISTA CORPORATION
RESPONSE TO REQUEST FOR INFORMATION
JURISDICTION: IDAHO
CASE NO: GNR-E-1 1-03
REQUESTER: Clearwater
TYPE: Production Request
REQUEST NO.: CW-7
DATE PREPARED: 4/9/2012
WITNESS: Clint Kalich
RESPONDER: Clint Kalich
DEPARTMENT: Energy Resources
TELEPHONE: [phone]
REQUEST:
Reference the Direct Testimony of Clint Kalich, p. 9, stating, "For example, canal hydro operates
during the spring and summer months, with no output during the winter. Avista's wind rating is
low due to the lack of wind diversity in its portfolio." Please list the wind projects that are in
Avista's portfolio and indicate the location, MW nameplate, expected energy output, the date the
contract was signed, and the on-line date of each.
RESPONSE:
Avista's only wind resource is a 35-MW share (of nameplate) of the Stateline wind project located
in Oregon. The contract was signed in 2004 and runs into 2014. On average Avista expects 9
aMW from this resource. Avista entered into a contract with First Wind for the Palouse Wind
Project on June 28, 2012. The approximately 105 MW (58-turbine) project is expected to enter
commercial service in the fall of 2012 and generate 40 aMW near Oakesdale, WA.
AVISTA CORPORATION
RESPONSE TO REQUEST FOR INFORMATION
JURISDICTION: IDAHO DATE PREPARED: 4/9/2012
CASE NO: GNR-E-1 1-03 WITNESS: Clint Kalich
REQUESTER: Clearwater RESPONDER: Clint Kalich
TYPE: Production Request DEPARTMENT: Energy Resources
REQUEST NO.: CW-8 TELEPHONE: [phone]
REQUEST:
For each of the five QF configurations presented in Table 4 on page 25 of Clint Kalich's Direct
Testimony, please provide all work papers, spreadsheets in electronic format with formulas
intact, and model outputs used in producing the values found in lines 8, 9, and 10. In the column
titled "Note." please explain fully the source of the noted SAR lines 2, 6, 7, 8, 9, and 10.
ISXF!li
The working papers are included in the File "CW_PR_8 Attachment A."
The notes are self-explanatory.
AVISTA CORPORATION
RESPONSE TO REQUEST FOR INFORMATION
JURISDICTION: IDAHO DATE PREPARED: 4/9/2012
CASE NO: GNR-E-1 1-03 WITNESS: Clint Kalich
REQUESTER: Clearwater RESPONDER: Clint Kalich
TYPE: Production Request DEPARTMENT: Energy Resources
REQUEST NO.: CW-9 TELEPHONE: [phone]
REQUEST:
Reference the Direct Testimony of Clint Kalich, pp. 13-14, stating:
It is often true that utilities are surplus in early years; being so is an essential part of
providing reliable utility service. It also is true that QF developers would be affected by
these surpluses were they to receive lower early-year payments during surplus years. But
this effect is a reflection of true avoided costs. It is not reasonable to hold a utility system
short both of capacity and reliability simply to promote QF development.
Given the "lumpiness" of utility generation investment, please explain in detail how a QF
development would ever, over time, receive compensation equal to what it costs a utility to build
a resource if it is denied capacity payments during surplus periods.
RESPONSE:
Acquisition lumpiness does not necessarily mean that a QF resource will get more or less value. A
QF could, because of its size, receive a payment greater than were it to have to follow the
acquisition schedule of a larger "utility-scale" resource. For example, it is possible that a utility
would defer the acquisition of a larger utility-scale resource until such time that the deficit being
met is closer to the size of the resource being acquired. In the interim period the market might be
relied upon to meet energy and capacity needs. However, when the QF valuation is made, the QF
resource would be paid for capacity in those years prior to the future acquisition where the utility is
deficit.
AVISTA CORPORATION
RESPONSE TO REQUEST FOR INFORMATION
JURISDICTION: IDAHO DATE PREPARED: 4/9/2012
CASE NO: GNR-E-1 1-03 WITNESS: Clint Kalich
REQUESTER: Clearwater RESPONDER: Clint Kalich
TYPE: Production Request DEPARTMENT: Energy Resources
REQUEST NO.: CW-10 TELEPHONE: [phone]
REQUEST:
Assume that an existing QF requested IRP Methodology pricing for the time frame after
expiration of its existing contract. Please describe how Avista would treat the expiring contract
in the IRP Methodology rate calculations. Would Avista include the output from the existing QE
contract in its assumed base case resource plan past the date of expiration of the contract? Please
explain the basis for the treatment of the expiring contract.
RESPONSE:
In this example, Avista would remove the expiring QF resource from its L&R tabulation before
calculating avoided cost rates. This removal would tend to make our acquisitions sooner and
payments of capacity to the QF resource larger (depending of course on the QF resource being of a
size large enough to affect our L&R position).